For analyst Chris Thompson, writing in an Aug. 10 Raymond James research report on Tahoe Resources Inc. (TAHO:NYSE; THO:TSX), "2Q16 represented as key quarter for Tahoe Resources, as it closed the acquisition of Lake Shore Gold, declared commercial production at Shahuindo, and continued to deliver strong operating results (generating significant FCF [free cash flow]) at Escobal and La Arena."
"Our investment thesis for THO remains firmly intact, satisfied by the company offering a unique combination of fully funded organic growth, ongoing FCF generation, a strong balance sheet, and a healthy dividend yield," the analyst continued.
According to Tahoe's Aug. 9 press release, which outlines the company's H1/16 performance, the Escobal mine in Guatemala produced "metal concentrates" containing 5.7 Moz silver, 2,711 oz gold, 2,699 tonnes lead and 4,037 tonnes zinc during Q2/16.
This "exceeded our expectations of 5.3 Moz Ag or 5.7 Moz Ag Eq on higher grades while cash cost bettered our estimates of US$6.96/oz Ag or US$8.05/oz Ag Eq," Geordie Mark of Haywood Securities wrote in an Aug. 11 research report.
"The company is underpinned by production from Escobal, which is a top tier asset in terms of its resource endowment and Ag grade, which together support the potential for healthy operating margins over a protracted period," Mark wrote, adding that gold production at La Arena and Shahuindo in Peru and at Tahoe's Canadian assets was in line with, or exceeded, Haywood's expectations.
In his Aug. 10 research note, Dundee Capital Markets analyst Ron Stewart observed, "Strong Q2 production led to better than expected financial results as Tahoe's core assets continue to perform well. We view Tahoe as a top tier intermediate precious metals company given its high quality and low cost operations, growth profile, strong balance sheet, sustainable dividend and disciplined M&A strategy."
Reflecting on earnings that beat his firm's estimates, Andrew Kaip of BMO Capital Markets expects Tahoe's Q2 results to "set the stage for a good Q3/16."
Kaip also noted, "Strong silver production was driven by higher-than-expected silver grades at Escobal (509 g/t) [and] the company now expects to achieve the top end of silver guidance of 18–21 Moz."
Tahoe's Q1/16 acquisition of Lake Shore Gold and its assets in Canada, including the Timmins mines, resulted in the addition of production from those assets in the second-quarter numbers, Cosmos Chiu of CIBC noted in an Aug. 10 research report.
Also commenting on the impact of the Lake Shore acquisition, Mark noted, "Integration of the Bell Creek and Timmins West gold mines into the company's portfolio bolsters Tahoe's production profile, whereby the Company's strong balance sheet can be deployed to consolidate further its production base in east Canada. The collective production profile and margins, of the aforementioned assets, establish Tahoe as a growing mid-tier precious metals producer."
Tahoe has also announced management changes, including the election of Ron Clayton as president and CEO, and Elizabeth McGregor as vice president and CFO. "The appointment of Mr. Clayton to the position of CEO should be viewed positively given his intimate knowledge of the company," Chiu wrote.
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